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Daily Tax Report: International

Mnuchin Threatens U.S. Car Tariffs to Counter Digital Tax (1)

Jan. 22, 2020, 10:48 AM

U.S. Treasury Secretary Steven Mnuchin dangled the prospect of retaliatory tariffs on automobile imports if countries go ahead with digital taxation plans.

“If people want to just arbitrarily put taxes on our digital companies, we will consider arbitrarily putting taxes on car companies,” Mnuchin said at a panel discussion at the World Economic Forum on Wednesday. “We think the digital tax is discriminatory in nature.”

Read More: Why Digital Taxes Are the New Trade War Flashpoint: QuickTake

Internet companies have long been the target of complaints that they don’t pay enough tax. France imposed a 3% levy on the digital revenue of companies that make their sales primarily in cyberspace, such as Facebook Inc. and Alphabet Inc.’s Google.

Other countries also are taking action. The U.K. government plans to go ahead with a tax on digital services in April, according to Chancellor of the Exchequer Sajid Javid.

Speaking during the same panel discussion in Davos, Switzerland, Javid said the levy is designed to be temporary and to fall away once there’s international agreement on the issue.

Britain and the U.S. will have private talks on the matter, just as President Donald Trump had with French President Emmanuel Macron, said Mnuchin, who will meet Javid in London on Saturday.

The Treasury secretary and his U.K. counterpart both termed a trade deal between the two countries a priority. Britain is due to leave the European Union at the end of this month, though Javid said a deal with the EU will take precedent.

“Having a free trade agreement between the sixth largest economy in the world and the largest economy in the world is going to benefit all our consumers in terms of jobs, prices,” Javid said. “It’s hugely important.”

In a move that might facilitate the implementation of reprisals for a digital tax, the U.S. Department of Justice recently said the White House can use executive privilege to decline to release a Commerce Department report advising Trump on proposed tariffs on imports of automobiles and car parts.

The study focused on whether to impose tariffs on the auto imports under Section 232 of the Trade Expansion Act, which allows for duties without a vote by Congress if imports are deemed a national-security threat. It was the same law the Trump administration used to slap tariffs on steel and aluminum imports.

Mnuchin, who in the past has taken a more dovish stance on tariffs than others in the Trump administration, acknowledged that they’ve been useful as leverage.

“There’s no question the president’s tariffs have been a big incentive in all these trade agreements,” Mnuchin said. “Whether you like tariffs or don’t, we wouldn’t have these trade agreements without actual tariffs or the threat of tariffs.”

--With assistance from Lucy Meakin.

To contact the reporters on this story: Saleha Mohsin in Washington at smohsin2@bloomberg.net; Catherine Bosley in Zurich at cbosley1@bloomberg.net

To contact the editors responsible for this story: Fergal O’Brien at fobrien@bloomberg.net Brendan Murray, Brian Swint

©2020 Bloomberg L.P. All rights reserved. Used with permission

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